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The Winery: Keys to Financial Success

In June I attended the National Farm and Ranch Business Management Educators annual conference in Rochester NY. Steve Richards, manager at Casa Larga Vineyards and Winery (Fairport, NY), shared his expertise on managing a winery. Steve also worked for many years at Farm Credit East and the Winery Benchmarks Program: https://www.farmcrediteast.com/winerybenchmarks

New York State Wine Overview

• Influence of international trade: when Australia grape/juice prices go down, wineries will increase usage of this supply up to the allowable thresholds under current regulations
• 60% of wine volume produced is non-varietal sweeter wines
• Riesling is the top NYS varietal, about 10-15% of overall wine volume produced
• A good way to forecast wholesale wine sales is to research the general restaurant sales forecast for the upcoming periods.

Keys to Financial Success:

• Inventory Turnover: a typical winery will to have 1.5- 3 years max of annual sales in inventory. Larger inventory is less favorable and wineries must work to increase the number of inventory turns per year to over 1. Successful wineries move inventory faster and bottle final product as close to sales date as possible (accounting for any bottling/conditioning factors influencing final quality). Aging inventories over 3 years old is less desirable.
• Labor Efficiency: Wineries track cases per worker and this is a key focus of scaling the business. The biggest cost factor as a winery grows is the overhead costs of marketing and regulatory compliance. There are labor efficiency sweet spots at different scales

500-2,500 cases is a good place to be. Labor efficiency ranges from 6k-10k cases per full time worker.

At ~5,000 cases the retail only establishment has maxxed out on sales. The winery begins to wholesale product. This creates an increased administrative burden to serve these new markets.

5,000 – 10,000 cases tends to be poor scale for labor efficiency, possibly down to 4k cases per worker

At around 15,000 cases the labor efficiency curve begins to get better.
Labor efficiency peaks at the scale of ~35,000 cases per year, with the labor benchmark approaching 10,000 cases per full time worker.